What is a subsidiary?

Updated: 7 December 2019

A subsidiary (body corporate) is an enterprise that's controlled by another controlling enterprise (another body corporate) in one of the ways below.

The controlling enterprise of the subsidiary either:

• controls the composition of the subsidiary's board; OR
• is able to cast 50% or more of votes at the subsidiary's general meeting; or
• holds more than 50% of the issued share capital (but this excludes shares that hold rights to only profit or capital distribution).

Now, what does it mean to control the composition of the subsidiary’s board?

It means the controlling entity is able to appoint or remove all or the majority of the subsidiary’s board (the directors and secretaries). 

Also, keep in mind, while general meetings are not a legal requirement under the Corporations Act, shareholders (also known as members) have the right to call general meetings.